Fermentation rises as alternative proteins hold ground amid food-tech VC slowdown

After years of surging investment, the food-tech sector faced a sharp correction in Q1 2025 – but alternative proteins remain a rare bright spot. According to PitchBook’s Q1 2025 Foodtech VC Trends preview, overall venture capital funding in food tech dropped nearly 50% quarter-over-quarter, reaching just US$1.4 billion across 202 deals. Yet within that broader decline, early-stage fundraising for alt-protein startups – especially those in fermentation – has proven surprisingly resilient.

The report highlights a number of high-profile stumbles among mature alternative protein companies. Beyond Meat posted its third consecutive quarterly revenue decline and a US$1.1 million loss, resorting to US$100 million in debt funding from a sustainable food nonprofit. Meati, a once-promising player in mycelium-based meat alternatives, suffered a technical default and sold off assets for just US$4 million despite raising over US$500 million in previous rounds.

These struggles point to a recalibration of expectations for consumer-facing alt-protein brands, particularly those that scaled quickly without securing profitability. However, investor confidence in enabling technologies and infrastructure remains intact. Companies like Liberation Labs and Vivici – which focus on precision fermentation and dairy protein production – closed early-stage rounds of US$52 million and US$33.8 million respectively. Cultivated meat producer Aleph Farms also raised US$29 million in a Series C, while plant-protein startup PROJECT EADEN secured US$15.5 million in Series A funding.

These deals indicate a shift away from branding-centric alt-protein plays and toward foundational technologies and ingredients. Liberation Labs, for instance, aims to operate as a contract manufacturer, providing the fermentation infrastructure for other startups such as Vivici. This signals that investor appetite may be migrating toward business models that underpin the broader alt-protein value chain, rather than rely solely on consumer marketing.

In total, alt-protein companies accounted for US$208 million in VC investment across 42 deals in Q1. That deal volume put the category ahead of more hyped verticals like e-commerce and food discovery, though well behind restaurant tech and food production. Over the trailing 12 months, alt-proteins attracted over US$1.7 billion in investment, second only to restaurant and retail tech, which brought in US$2.4 billion.

Even with continued investment, the funding environment remains highly selective. Median pre-money valuations for early-stage food-tech companies have dropped to $6.1 million, down from $12.1 million in 2021. Alt-protein startups that want to raise in this climate must demonstrate more than technical innovation – they also need to show credible progress toward commercialization, unit economics, and scalability.

This recalibration may ultimately benefit the category. Investors are showing increased willingness to back ingredient companies, biomanufacturing platforms, and startups with B2B models that offer infrastructure and reliability rather than risk-heavy consumer propositions. As capital gravitates toward these enablers, fermentation in particular appears well-positioned to lead the next phase of growth.

While the IPO window remains effectively closed, and Meati’s downfall serves as a cautionary tale, the overall direction of early-stage activity suggests that alternative proteins are not being written off – just more rigorously vetted. In a tighter funding environment, the winners will likely be those building the systems to support the future of food, not just those branding it.